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Changes to the local government pension scheme in Scotland: the final piece of the puzzle

Changes to the local government pension scheme in Scotland: the final piece of the puzzle

Posted on 8th September 2014 at 9:00 am

Towards the end of August, the final piece of the Local Government Pension Scheme (LGPS) puzzle was laid down with the publication of transitional regulations. They have been created partly to protect the past service benefits of members of the current LGPS. The LGPS (Transitional Provisions and Savings) (Scotland) Regulations 2014 supplement the main regulations which were published in June. They establish the ‘LGPS 2015’ scheme in place of the previous LGPS schemes as part of the public sector pension reforms which will change the future benefit structure in the LGPS from ‘final salary’ to ‘career average’.

The transitional regulations confirm that, for those in the current scheme who were active members on 31 March 2012 and who, from the following day, were 10 years or less away from their normal retirement date, there will be a statutory ‘underpin’. This is to ensure that those members are able to draw a pension on retirement which is no lower in value than the pension they would have received had the current LGPS not been replaced on 1 April 2015. Members within this 10-year bracket whose employment is terminated on the grounds of efficiency or redundancy prior to their normal retirement date are also entitled to the same protection.

Some of the longer-serving members of the LGPS will be pleased to learn that the ‘Rule of 85’ has also been retained, to a degree, in the LGPS 2015. The ‘Rule of 85’ entitles a member to retire early from age 60 (or, with the employer’s permission, age 55) and draw an unreduced pension from the LGPS. A member can do so if his age plus the number of years he has spent in pensionable service totals 85 or more. The new regulations state that, where such a person’s membership continues into the LGPS 2015 and where he satisfies the ‘Rule of 85’ at the date of retirement, benefits accrued prior to 31 March 2020 will continue to be unreduced (although any benefits accrued after that date will be reduced, to reflect their early payment).

The regulations also confirm that any admission agreement entered into before 1 April 2015 will continue in force after that date, and any employees of previously designated “admission bodies” who were eligible for LGPS membership before that date will become members of the LGPS 2015 scheme, subject to certain conditions.

Both the transitional regulations and the Local Government Pension Scheme (Scotland) 2014 Regulations will come into force on 6 April 2015.

MacRoberts are experienced in advising on all matters relating to the operation of the LGPS in Scotland.

Author

With clients ranging from sole traders to companies listed across the globe and trustees of pension schemes of all sizes, he has more than 18 years’ experience advising on a diverse range of pension, share scheme and incentive matters. He works with clients to find solutions and achieve their objectives.

He holds the Chartered Insurance Institute’s Financial Planning Certificate, and is a member of the Association of Pension Lawyers and the Share Plan Lawyers Group. He regularly writes and speaks on pensions, share schemes and cash-based incentives.

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